Like a great white shark looking for blood in the water, Warren Buffett’s Berkshire Hathaway Inc. (BHI) has clamped its jaws around another ailing energy asset, Seitel Inc., after agreeing to finance its voluntary bankruptcy reorganization. The transaction would give the Omaha-based holding company title to a sizeable North American-focused seismic database and increase its growing energy holdings, which now include two major natural gas pipelines.

Houston-based Seitel holds one of the largest libraries of publicly available seismic data, whose main focus is onshore, offshore and the transition zones of the Gulf of Mexico, onshore East Texas and in Canada.

Subsidiaries include Seitel Solutions, a web-enabled map-based interface that allows customers to browse the company’s seismic database. Seitel Data, another subsidiary, designs, markets and executes new surveys for exploration and production companies. It also purchases existing surveys from other companies. The company estimates its library encompasses more than a petabyte of 2-D and 3-D seismic data located in every major oil and gas producing trend in the onshore domestic United States, the transition zone and offshore U.S. Gulf of Mexico.

DDD Energy, Seitel’s exploration and production division, also would come with the deal. DDD’s focus in the onshore Gulf Coast area of Texas, East Texas, Louisiana, Mississippi, Alabama and the Sacramento Basin of California.

To avoid involuntary bankruptcy, Seitel had voluntarily submitted a bankruptcy petition under Chapter 11 late Monday. The decision was made following a transaction earlier this month to restructure its $255 million in outstanding senior notes. The notes were bought from creditors by San Diego-based private equity firm Ranch Capital LLC. In turn, BHI bought all of the Ranch notes.

Ranch and BHI announced they will work together to reorganize Seitel, and the reorganization plan will be financed by BHI, which will receive all the shares of stock in the reorganized company, Seitel said. Seitel estimated the total of its unsecured claims to creditors of its entities to be $265 million, including the notes held by BHI.

Ranch was formed in October 2002 by Lawrence S. Hershfield and Randall L. Jensen. Hershfield previously worked with BHI when he was employed by Leucadia National Corp. and ran Finova Group on behalf of Berkadia LLC, a joint venture of BHI and Leucadia. Hershfield will become Seitel’s chairman when the transaction is completed. Larry Lenig will continue as Seitel’s CEO when it emerges from bankruptcy.

BHI moved into the energy arena in 1999 with the purchase of MidAmerican Energy Holdings Co. (see Daily GPI, Oct. 26, 1999), and then Buffett and company held steady until 2002, when it found more ailing energy companies to assist. With Enron Corp.’s collapse, Buffett made his move last year, purchasing two natural gas pipelines, Kern River Gas Transmission Co. and Northern Natural Gas Co., and providing key loans to Williams Cos. and CenterPoint Energy Inc.

Williams made a deal with MidAmerican early in 2002 to sell one of its prized assets, the Kern River pipe, for $960 million in cash and debt (see Daily GPI, March 8, 2002). BHI also had held 1.5 million preferred shares in Williams until last May, when the company announced it would pay off its high-interest, short-term $1.17 billion loan with BHI (see Daily GPI, May 21).

As Dynegy Inc. teetered toward financial ruin last summer, it sold MidAmerican all of its newly acquired Northern Natural Gas Co. at a loss, agreeing to a deal for $928 million in cash and the assumption of the pipe’s debt (see Daily GPI, July 30, 2002). And last November, BHI and Credit Suisse First Boston threw a lifeline to CenterPoint Energy Inc., providing its electric utility subsidiary, CenterPoint Energy Houston Electric LLC, a $1.31 billion senior secured credit facility, which guaranteed that the utility could meet a payment deadline and maintain a $4.7 billion credit facility (see Daily GPI, Nov. 14, 2002). The three-year loan, which carries a 12.75% interest rate, was secured with CenterPoint’s second mortgage bonds.

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